Reverse Mortgage Flexible About Prepay
Believe it or not I get many people call me wanting to get a reverse mortgage with the intent of actually making payments on the mortgage.
There is no doubt they intend to make payments. Whether they will is a different story.
The reason for my skepticism is people want reverse mortgages for a very specific reason. They need the money because there isn't enough. That being the case why would that change for them to have enough later to make extra payments?
Regardless, a goodly portion of my potential customers ask if the reverse mortgage company will ding them if they make payments on the loan.
The truth be known reverse mortgage lenders, and more particularly FHA, have no qualms with borrowers making payments of any kind prior to the end of the mortgage.
You may be asking why someone would want to make payments. Well, people have reasons from hating debt of any sort to using the mortgage as a tax shelter. This latter reason is one of the biggies.
What is different about the reverse mortgage in comparison to the forward mortgage is you don't make periodic interest payments, so most reverse mortgage customers don't get that particular write-off until the very end of the mortgage.
You gotta make mortgage payments to get the write-off. This in itsef is an enticing reason for a customer to at least ask the question.
Keep in mind the tax laws. Most people roll closing costs into the loan when they initially get a reverse mortgage. Last time I checked the tax laws said closing costs needed to get paid prior to being able to make payments on the mortgage for the sake of writing off interest.
Just keep in mind the order in which early payments are applied.
One big expense when paying closing costs is the origination fee. That can easily be up to two percent of your appraised value when you first obtained your loan.
At least you have the lender's fee as a write-off while paying off closing cost prior to getting the interest write-off. Please check with your CPA on all tax related matters.
There is no doubt they intend to make payments. Whether they will is a different story.
The reason for my skepticism is people want reverse mortgages for a very specific reason. They need the money because there isn't enough. That being the case why would that change for them to have enough later to make extra payments?
Regardless, a goodly portion of my potential customers ask if the reverse mortgage company will ding them if they make payments on the loan.
The truth be known reverse mortgage lenders, and more particularly FHA, have no qualms with borrowers making payments of any kind prior to the end of the mortgage.
You may be asking why someone would want to make payments. Well, people have reasons from hating debt of any sort to using the mortgage as a tax shelter. This latter reason is one of the biggies.
What is different about the reverse mortgage in comparison to the forward mortgage is you don't make periodic interest payments, so most reverse mortgage customers don't get that particular write-off until the very end of the mortgage.
You gotta make mortgage payments to get the write-off. This in itsef is an enticing reason for a customer to at least ask the question.
Keep in mind the tax laws. Most people roll closing costs into the loan when they initially get a reverse mortgage. Last time I checked the tax laws said closing costs needed to get paid prior to being able to make payments on the mortgage for the sake of writing off interest.
Just keep in mind the order in which early payments are applied.
One big expense when paying closing costs is the origination fee. That can easily be up to two percent of your appraised value when you first obtained your loan.
At least you have the lender's fee as a write-off while paying off closing cost prior to getting the interest write-off. Please check with your CPA on all tax related matters.
posted by Debt Consolidation Loan at
6:18 AM
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